Portfolio update: 19 August

All except Parkson Retail have reported Q3 earnings.

Quite a bit of changes.

Divested Golden agri, YZJ. YZJ has yield an return of 30% of capital and Golden Agri flat. I wanted a purer dividend play portfolio and golden agri didn't fit. I am glad I sold earlier.

Added:
China Merchant Pacific Holdings
Singapore Shipping
Venture
Parkson Asia Retail

All counters has a yield of at least 4%

Outlook:

Lee metals has 2 quarters of poor core earnings. It is fine with me. When I invested, I am ready for 2 cents dividends which I think is sustainable. 2014 has earnings boasted by AustVille, I believed, whole year dividends will match that of last year.

Venture has recover as expected, if trend continues, 50 cents dividends should be sustainable and also payout for FY 2014

APTT did very well after the tax settlement. I believed I overkilled in my earlier estimation of capex and loans utilized. I believe 8 cents dividends can be maintained till 2016.

As for Singapore Shipping and China Merchant Pacific Holdings, I bought for growth. Singapore Shipping will charter 2 new ships in 2014, and CMPH bought jiurui expressway. Details, please read valuebuddies. These two are my first copycat investment after doing my fact finding.

Possible actions for next 6 months.

I might sell 1 or 2 winners to hold cash to await more opportunities.

I am monitoring the following very closely

1) ST engineering
2) Low Keng Huat

Less closely, but in watchlist:
1) SIA engineering
2) Starhill Global Reit
3) Ascendas Industrial Reit

Cheers
Sillyinvestor

Random thoughts: communication breakdowns at work...

Hmm...

At my new workplace, I am supposed to "manage" staff. I find that a really weird concept. Can we really manage someone beside ourselves? My concept on manage is very different from others it seem.

My concept of manage is to work together to get something done, gel, cursed and move together. If someone don't move, the group will drag him along.

I always get this request from my boss to monitor someone closely and talk to the person.

Er... Seriously, unless someone is totally off, focusing and talking about his weakness might just reinforced that weakness. I prefer to talk about their strength and put them at the right place.

I used to get a lot of "lets not go into the nitty gritty", and "you don't see the big picture" comment. I always think very lowly of such bosses, now it's retribution time. Now, my staff don't understand what I am trying to do to synergized everyone's effort so that the total is bigger than the sum of individual parts, or at least reduce the "learning and unlearning". What goes round comes round, think my staff think the same of me now. LoL! But I am very happy that they are asking many questions, questioning my approach, I rather they do it in the open. That at least give me a chance to explain and sell.

I am full of weaknesses too, can I change them into strength? Maybe over time, it can get better, but definitely not because of magical speech. The morale is more important than specific weakness, isn't it.

Sugar coating? Pandering to others? No moral courage? No lei... I am just trying to make sure communication don't break down...

Anyway I am just a novice. Look, I believed if we swop out roles and tasked u to find my weaknesses, I am sure you can easily find a dozens. I already received a complaint from my "client " LOL.

A quick look at APTT Q2 results

3 questions matter.

1) Is there a deterioration in subscribers numbers and ARPU?

 

Hardly any improvement or deterioration in percentage terms. ARPU dip very slightly, most probably in preparation of the potential competition to come. Looking at the results, competition might not have begin.

2) What is the projected capex?

Projected capex for network expansion in 2014 remained at 40-50 mio, unchanged from Q1 

Thereafter, it will be 10-15 million for 2015 to 2016. The bulk of capex for network expansion will be in 2014. 

Since it will most probably in 2015 that we will see significant connection capex, and assume 10K connections a year, highly optimistic, capex will be 2.5 mio more per year.

So think we can assume capex of 60 mio, 30 mio and 30 mio over the next 3 years. Assume that use 20 million from cash flow to fund capex, total capex to be incurred by drawing down loans will be 40 mio, 10 mio, 10 mio, the 120 mio loans earmarked for expansion is not drawn down yet. By 2016, 60 mio loans at 4% will mean Finance cost of 2.4 mio more.

Assume 2016 FY

EBITA 200 mio

Interest cost (45 mio)

Loans 10 mio

Capex (30 mio)

Tax (20 mio)

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DPU - 115 mio 

8 cents.

Assume zero growth, and no lost of ground to competitors or that it get offset by the growth from TaiChung.

Verdict: capex risk to distribution is low

3) Is progress in network expansion made.

Commercial operations pushed to Q4 from 2H(as announced in Q1). Again, management has jumped the gun.

My thoughts:

It is very obvious the chairman is trying to a mini starhub on APTT. Bundling strategy, and quarterly payout. The Bundling strategy has not shown results yet. The growth should not come from basic TV subscribers but the increase in broadband or premium TV. The reason cited is poor economic conditions in Taiwan, lets give the chairman more time to see if he can do a "starhub" in Taiwan

Random stories: Lord Yang Jiang's Tactics and Li Po's dilemma

Before the onset of warring states, the hegemony of Yue was weak. Everyone knew it is the survival of the fittest. Most chose to pledge allegiance to the stronger states, but there were also few unknown warlords, who were ambitious and wanted to build their own empire. Many did not realized there were several hundreds of unknown warlords then. 

Everyone knew the size and wealth of the populace could well determine the fate of their state, but a few wise warlords knew reputation was a far more important factor for prosperity. It was reputation that drew able men from afar to serve. But reputation need to be built on the strength of one's army.

Lord Yang Jiang commanded a small but strong army. His strongest neighbor was the state of Qi. The ruler of Qi was in a state of stupor, in a mad race to develop the latest technology to build the greatest arms. Lord Yang Jiang knew it will be a painful learning curve before the state of Qi could advance to the stage of development of Qin, who were able to build weapons that allow troops to fight in the thick forests, and arrows that could be shot across the rivers. Ruler Qin was even able to build fortress on water, and hence, no warlords, dared invade the state of Qin although it was the smaller state among the powerful seven.

Lord Yang knew it would be a painful learning curve, and instead of joining that technological rat race to develop water fortresses, he chose to develop the fishing areas of the Yangtze river. He opened the state coffins and gave loans to fishermen to build bigger boats, so that they could venture further to fish. Many thought such money spent, were money wasted. But Lord Yang proved them wrong, many fishermen were willing to borrow the money to build bigger and better ships, and many fishermen along the Yangtze river came to Lord Yang's fief. The big demand of fishermen in turn attracted ship builders and carpenters. Because of the strong demand for his money, Yang start to charge exorbitant rates and only to bigger and more organised fishermen. He also developed the fishing ports into town areas. Very soon, when the state of Qi wasted more and more resources on the development of water fortresses, and drained the state resources, Lord Yang became an rich and successful warlord. He was so successful that the interests on the loans formed about 15% of the tax collected.

The success of Lord Yang did not go unnoticed, the ruler of Qi gave cheaper loans to attract the fishermen of Yang. He secretly persuaded the rich fishermen of Yang to default and come to his state, where he would welcome them in open arms.

Lord Yang knew he could not incurred the wrath of Qi, so he announced an edict that he will no longer gave out loans to fishermen, to appease Qi. For three months, he also took back about 2 billion silver coins of loans. Lord Yang knew he had to beat a small retreat to advance. Ruler Qi stopped his aggressive handout of loans too, worried that it would put a further dent to state's resources. 3 months after Yang's edict, he was still giving out loans, he was not in a hurry to wind down this lucrative trade, but to further assuage ruler Qi's worries, he surrendered the smaller fishermen port towns to Qi as tribute, and promised him a share of the profits.

Lord Yang has another plan, it was time to quickly build up his navy with the technology learnt from the community of ship builders, he wanted bigger and stronger war ships. His reputation grew, and many viewed him as a future power. Many forgot about the time bomb the ruler of Qi had planted in Yang's fief. It was not too long ago, that under the support of Qi, disgruntled fishermen not only refused to pay Yang's his loans but declared themselves independent of Yang's rule, they were very aggressive and with support of Qi, even attacked some of Yang's lands. Lord Yang was confident of squashing this small rebellion. But would this be the last, no one knew... Right now, Lord Yang continued to bask in glory and saw his reputation and fame increased.

Lord Li Po knew he had to expand quickly. Large swaths of land are neglected by his enemies. He knew his army was not large enough, so he spent money to recruit mercenaries. His biggest prize was Pluit Village, one of his largest town, with an area of 87,268 sq meters. He figured that the tax collected from the villagers will pay for the mercenaries. However, he realized to his shock that there were not many locals occupying the village. He made improvements to the village and hoped that more would moved in, he built homes for villagers. Many of these homes remained vacant until recently when finally 87% of it were filled. 

However, while the money collected increased, Lord Li Po needs to pay his mercenaries more, as his mercenaries demanded to be paid in their Chu State currency. Given the poor development of his states, his money were not worth a lot when compared to the Chu state currency. Lord Li Po was pondering whether to start occupying some of the lesser areas of Chu to further expand. But that would mean recruiting more mercenaries, and he knew he did not stand a chance to snatch the crown jewels of state such as the bustling Jiang ling or Paragon City, which the locals call it. However, most of his villages and towns were closed to 100% occupied, the space for growth will be very limited if he did not expand. He could wait for his states to get richer, such that he no longer need to pay the mercenaries so much, but that would take a long time and he worried his reputation would take a hit. 

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My best attempt at company reporting through story telling. Well... LOL

Random stories: The End

Derrick was walking along the broad corridor of the hospital. He felt so much better today. He remembered having problems breathing only yesterday. He could not wait to see his wife and son to tell them how much better he is now. He might just ask his wife to get his favorite Anderson Ice Cream for him. That thought made Derrick chuckled, he would most probably get a earful from his wife.

He saw a crowd and a glimmering light. A familiar face he saw, away from the crowd, sitting on a sofa nearby. He saw his old schoolmate. "Hey! Raymond." Raymond seemed surprised. "Oh, what an coincidence! er.. So what caused your death?" "Choy! Choy! What a way to greet your friend!" Derrick replied. "Oh... nevermind, enjoy your trip, I came back early." Raymond said.

Derrick was about to probe when he was distracted by the glimmering lights. He squeezed through the crowd and look at the lights. He began to feel himself drifting into space, like he is slumbering into a deep sleep. He saw a young couple, the father carrying a baby. There were 2 more children running around. His wife did not look too happy. He found the couple familiar. He looked at the boy yelling and got a shocked! Hey! that is my elder brother! What the.. He saw multiple halo of lights. Derrick looked at them. He saw images. One of it looked like his secondary school. He took a closer look...

He saw himself playing volleyball! He was like a nervous whack. The whistle blown! He saw himself hugging his teammates. They had won the C-division  championship.

Derrick realized sadly, what had happened. He had passed away.

He saw many more halo of lights. Glimpses of his past. His wife at university, his son. Then he saw something he didn't remembered doing. He looked closer.

He was at a wake. It didn't take long before Derrick realized he was at his own wake. His saw his wife staring blanking into space. His son was giving a speech. His son spoke fondly of him, about how he was a strict and scary father, but nonetheless also a wonderful friend and playful buddy. How he as a father, had played multiple roles and filled his heart. Derrick felt tears as he listened. He saw his colleagues. He went over, they were talking about him. They all had good things to say about him.

Derrick looked at the halos of lights. So many of them. One of them was grey, the image was that of the hospital.Derrick went back.

"Raymond." Derrick called. "That was quick. You didn't spend too much time living the past?"

Derrick wanted to ask more, when he saw Raymond image fading away, Raymond smiled. "I am ready for my next journey. Take care. By the way, you can go through the lights as many times as you like. If you focused hard enough, you can hear what the people are thinking. I did it once and stopped."

"Why?" Before Raymond could answer, he disappeared. Derrick looked at the crowds staring at the bright light. "The portal to our past" he muttered to himself. Most of them are like in a trance, some of them in tears, some of them smiling, some of them in agony. Most of them were is disbelief. 

Derrick thought for a while. He sat down on the sofa where Raymond sit. He realized that's life isn't it. Looking at the past. Hoping to know "what if", searching for the "truth". Derrick heave a deep sigh of relief. He didn't have much regrets. He leaned back on the sofa. He is ready too. He didn't need to know what were the true thoughts of his friends and families about him. The truth is within himself, he had tried his best and had no regrets. 

 

Random stories: Please have faith in me

Again, the post inspired by LP who merge story telling with explanation. LOL, too bad I have no advertisement fees, otherwise, I will offer some to LP as royalties. But my pen is weak, anyway, here goes:

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Mrs Teo threw her stack of pupils' work on the desk, and grumbled:" I had enough of Vincent's excuses! His results is getting from bad to worse, when I confronted him, he always say he will do better next time, and that he was busy at home! As if everyone else has a easy time" Mrs Teo's colleague, Mr Ng, came over to Mrs Teo's desk, and said:" The economy is doing so badly, and unemployment is so high, heard his dad lost his job. I think he really had it tough." Mrs Teo:" I know! This has been going on for 4-5 years! After the GFC, the economy never really recovered! Look, Peter and Benson face the same problem. I understand their studies will take a hit! But life has to go on! Their results have improved. What about Vincent? Excuses and excuses!"

Mr Ng sighed. He left the staffroom. He saw Vincent reading a book as he walked. He went over, gave Vincent a pat. Vincent looked up. Mr Ng saw how tired Vincent looked. "How are things?" Vincent wanted to say something, but he hold back, and muttered:" I don't know." Mr Ng tried to be more upbeat, "Hey, come on, show some fighting spirit! I believed you will overcome your problems, just like Peter and Benson!" Vincent seem irritated suddenly. "Peter and Benson again! I know, they are poster boys! I... Nevermind" Vincent walked off to the bus stop. Mr Ng was a bit taken aback by Vincent's reaction. He was thinking what had happened to the well-mannered and high achieving boy he taught a few years ago. Just then, Mrs Teo came by, "what happened?" she asked.

"I think something is bothering Vincent. Maybe I should find out more." replied Mr Ng.

"I know what is bothering him, his parents lost their jobs. He has problems coming to terms with that. He also need to cope with higher demand of the curriculum, and he realized he is not that achieving boy anymore, and he is giving up on himself! I encouraged him, he sound confident of doing better initially, but ... " Mrs Teo sighed loudly, "he does not even dare to assure me that he will try anymore!"

"I am going to find out more." Mr Ng said.

"Good luck to you, I would think working on other pupils would be more rewarding, he is a has been, there is opportunity cost to our effort, you know" Mrs Teo said as a matter of fact.

Mr Ng pondered what Mrs Teo said. "No, I will need to find out more."

Mr Ng decided to make a trip to Vincent's house. When he was at the corridor, he heard his dad's voice. "Vincent, when I get that customer, I will be able to earn enough to stop worrying about making ends meet, we are rushing for time, can you hurry up." Mr  Ng knocked on the door and Vincent's dad came to the door. He recognized Mr Ng and was shocked to see him. "Vincent, did you get into trouble in school?" Vincent's father yelled.

"No, no, nothing of that sort, I just thought I dropped by to see how is he coping? His results is deteriorating." Mr Ng said.

"Oh, come on in" said his dad softly.

Mr Ng saw items that looked like big pieces of white sponge on the floor, and many plastic tubes and some material that he could not make out of.

"The company I worked for was bought over and I was retrenched, I couldn't find a job, and decided to try my hand on business. I still know many of my ex-boss clients, I am trying to customized these filters so that their production can be smooth and cheaper. But I do not get many orders until recently, and since every order is rather different and small, we can only used our hands to make them"

"Er... I can help for a while, if I may be of help."

Mr Ng chatted with the family as they showed him the steps in making the filter. He realized while it was not actually hard work, Vincent had to take care of his younger brother too. Feeling embarrassed, his dad told Vincent to go for his studies. Vincent told his dad not to worried, he never missed a homework.

Mr Ng looked at Vincent totally differently, "how silly am I to compare him with Peter and Benson? Vincent had so little  time in for his homework and studies, yet he had not failed a single subject! What an achievement!"

Mr Ng gave Vincent a tight squeeze on his hand. "You are a survivor, the external circumstances have not been kind to you. I believed when your dad makes a proper living, you will bloom! I do not know when that will be, but I no longer doubt that day will come." Under the fatigue eyes of Vincent, Mr Ng saw a spark.

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My story ends. I did not really like it. But It was a fun try. Not sure if anyone can see the financial side behind the story, or find it too glaringly obvious.

Well, but I enjoyed the process. Cheers!

Quick look at YZJ Q2 results

A quick one.

YZJ announce latest results:

http://infopub.sgx.com/FileOpen/YZJ_2Q20...eID=308530

My thoughts:

The positives:
1) "the darkest hour" before dawn, did not seem to arrived? Take away one off tax rebate, and assign an 15% tax rate, plus the one off maturity of fixed deposit of 130 mio, NP still improve from 808 mio rmb to 856 mio.

2) The fall in revenue from HTM is offset by increase in shipbuilding activities

3) Shipbuilding margin improved QoQ

The negatives:
Total HTM assets did not fall from Q1, in fact it increase marginally from 12.7 billion to 12.9 billion. Yet revenue from HTM has dropped from 597 mio to 339 mio.

It could mean 2 things: Most maturity date did not fall in Q2. BUt if you look at past year trends, the weakest quarter is usually Q3 or Q4, and it is the first time, a significant fall of revenue is recorded.

So it could also mean there is some rolling over (speculation)of HTM assets. e.g. extension of maturity date.

But all in all, positives offset negatives.

(divested, but still interested)